‘s (BAF) growth will continue to support its premium valuations, global brokerage Jefferies has increased the target price on the NBFC stock to Rs 8,000.
“BAF continues to deliver stronger than peer-group growth as well as profitability. Moreover, even if there is some moderation in NIMs due to a rise in funding costs, it could get compensated by the potential for operating efficiencies. These would support its premium valuations,” the brokerage said in a report.
While raising its earnings outlook of Bajaj Finance marginally, Jefferies sees a 28 per cent CAGR in profit over FY23-25 (FY23 should grow fast on a low base). With a hold rating on the bluechip stock, the brokerage has increased its target price to Rs 8,000 from Rs 7,300 earlier based on 7.2x Jun-24E adjusted PB.
In the report, the brokerage cited 3 catalysts:
1) Stronger-than-expected growth in consumer durable and rural financing business
2) Further improvement in operating efficiencies and reduction in cost ratios, and
3) Increasing competition from banks, lower market share in online consumer product sale financing could be key risks in the longer term.
If the NBFC gets a nod from RBI to launch credit cards, then it could be another trigger for the stock. “This would enable BAF to take the product to deeper markets as against the top-100 towns where it sells cards of RBL Bank/ DBS Bank and where the majority of players operate. If it achieves 20-40 per cent cross-sell to non-delinquent client base of 40
million and even at lower transaction values, it could make Rs 9-17
billion in profit in 3 years. This is 5-10 per cent of FY25E profit and would add growth drivers,” Jefferies said.
In the bull case scenario, it sees the stock rallying up to Rs 9,200 or 22 per cent from the current market price.
After the release of the Jefferies report, the stock was up 3 per cent at Rs 7,513.75.
The Nifty stock, which has been trading flat in the last one year period, is a consensus buy according to 26 analysts out of which only four have sell ratings.
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